The internet’s rapid growth has transformed global trade dynamics. Over the past 25 years, India’s exports have surged 17 times, while imports have increased by 19 times. Parties from different regions are forming agreements to facilitate exporting, importing, and other business activities.
Generally to execute an agreement both parties put their signature on physical document to signify their commitment to the terms and conditions mentioned in the Agreement. However, there are instances where parties cannot meet in person to sign a physical Agreement. In these situations it has been observed that one party (from country A) may choose to sign the agreement in person and then email a scanned copy to the other party (to country B). The second party (from country B) would then print the scanned agreement, sign it, and send back a scanned version of the signed document. As a result, each party ends up with two copies of the agreement: one with their own original signature and another that has the printed signature of the other party. This means there isn’t a single physical agreement containing the original signatures from both parties. We will explore the validity and enforceability of agreements created in this manner.
Determining the Validity of These Agreements
In India, agreements are primarily governed by the Indian Contract Act. A contract is defined as an agreement that can be enforced by law, while an agreement consists of promises that serve as consideration for one another.
A valid contract is an agreement that meets all the necessary legal requirements and is enforceable by law. The essential elements that constitute a valid contract include:
- Offer and Acceptance: There must be a clear offer made by one party and an acceptance by another party.
- Consideration: Something of value must be exchanged between the parties, which can be money, services, or goods.
- Capacity: All parties involved must have the legal capacity to enter into a contract, meaning they are of sound mind, not minors, and not under duress or undue influence.
- Legality: The purpose of the contract must be lawful; agreements related to illegal activities are not valid.
- Certainty: The terms of the contract must be clear and specific enough to be enforceable.
When these conditions are satisfied, a valid contract creates binding obligations for all parties involved. If one party fails to fulfill their obligations, the other party can seek legal remedies for breach of contract.
In contrast, a void contract is an agreement that lacks legal enforceability from the moment it is created. This can occur for several reasons:
- Illegality: If the subject matter of the contract is illegal or against public policy, it is void.
- Impossibility of Performance: If the terms of the contract are impossible to perform (e.g., agreeing to do something that cannot physically or legally be done), it is void.
- Lack of Capacity: If one or more parties do not have the legal capacity to enter into a contract (such as minors or mentally incapacitated individuals), the contract is void.
- Uncertainty: If the terms are vague or ambiguous to a degree that makes enforcement impossible, the contract is void.
A void contract has no legal effect; it is as if it never existed. Parties cannot enforce any obligations under a void contract, and no legal remedies are available for breaches.
In summary, valid contracts create enforceable obligations between parties, while void contracts lack any legal effect from inception. Thus, for a contract to be considered valid under common law, it must include several key elements: offer, acceptance, consideration, the intention to create legal relations, the authority and capacity of the parties, and certainty. If any of these elements are missing, the contract may not be legally binding and could be unenforceable in court.
According to Section 10 of the Act, the following conditions must be met for an agreement to qualify as a contract:
- All parties must willingly agree to the terms without coercion.
- All participants must have the legal capacity to enter into a contract (e.g., they must be of legal age and mentally competent).
- The subject matter of the contract (consideration) and its (Object) purpose must be legal and not violate any laws.
- The agreement must not be categorized as void under the law.
It’s important to note that this section does not override any other Indian laws that may require certain contracts to be in writing, signed by witnesses, or officially registered.
Under the Indian Contract Act, there is no requirement for parties to sign an agreement in person or for there to be a single agreement with original signatures of both parties for it to be valid. The Act focuses more on the intent and substance of the contract rather than the formality of signatures. If a contract has been acted upon but lacks sufficient signatures, its enforceability depends on certain key factors:
- Was there any Offer given?
- Is there any evidence of Acceptance?
- Did both parties exchange something of value?
- Did both parties intend for any terms to be binding?
These factors determine whether the agreement is legally valid, even in the absence of formal signatures. Thus, it can be inferred that absence of a physical document containing the original signatures from both parties does not inherently invalidate a contract if these elements are satisfied.
Additionally, Section 13 defines ‘consent’ as the mutual agreement of two or more persons on the same subject matter in the same sense. This also doesn’t indicate that the validity of an agreement would be determined by affixing sufficient signatures of both parties on the agreement.
While Indian courts have not directly addressed cases involving insufficiently signed or unsigned agreements, the rulings discussed below suggest that if the essential elements of a contract—such as offer, acceptance, consideration, and the intention to be bound—are present, the agreement cannot be deemed unenforceable.
In Brij Mohan & Ors. vs. Sugra Begum & Ors., the Supreme Court emphasized that a contract for the sale of immovable property does not necessarily require written documentation. However, when plaintiffs seek specific performance based on an oral agreement, they carry the burden of proving that a clear consensus existed between the parties regarding the essential terms of the contract. The determination of whether such an oral contract exists is fact-specific and must be evaluated based on the circumstances of each case.
“There is no requirement of law that an agreement or contract of sale of immovable property should only be in writing. However, in a case where the plaintiffs come forward to seek a decree for specific performance of contract of sale of immovable property on the basis of an oral agreement along, heavy burden lies on the plaintiffs to prove that there was consensus ad-idem between the parties for a concluded oral agreement for sale of immovable property. Whether there was such a concluded oral contract or not would be a question of fact to be determined in the facts and circumstances of each individual case. It has to be established by the plaintiffs that vital and fundamental terms for sale of immovable property were concluded between the parties orally and a written agreement if any to be executed subsequently would only be a formal agreement incorporating such terms which had already been settled and concluded in the oral agreement.”
In the said judgment the Hon’ble Supreme Court further relied on an earlier decided case In Kollipara Sriramula v. T. Aswathanaryana & Ors. [1968]3 SCR 387] wherein it was held as follows:
“It is, therefore, not possible to accept the contention of the appellant that the oral agreement was ineffective in law because there is no execution of any formal written document. As regards the other point, it is true that there is no specific agreement with regard to the mode of payment but this does not necessarily make the agreement ineffective. The mere omission to settle the mode of payment does not affect the completeness of the contract because the vital terms of the contract like the price and area of the land and the time for completion of the sale were all fixed.”
In Shankarlal Narayandas Mundade v. The New Mofussil Co. Ltd. reinforced this perspective by stating that unless an inference can be drawn from the facts that the parties intended to be bound only when a formal agreement had been executed, the validity of the agreement would not be affected by its lack of formality.
Similarly, in Trimex International FZE v. Vedanta Aluminium Limited, the court ruled that even without a signed agreement, valid contracts can be inferred from various forms of communication, such as emails and letters. The judgment highlighted that once essential terms are agreed upon, a contract is considered concluded, regardless of whether a formal document has been executed later. The court noted that minute correspondence between parties can demonstrate mutual understanding and acceptance of critical contractual elements.
“Once the contract is concluded orally or in writing, the mere fact that a formal contract has not been prepared by the parties does not affect either the acceptance of the contract so entered into or implementation thereof.
“A contract is said to be concluded when parties agree as to the ‘essential terms’ of the contract though minor details can be left over for them to decide later, albeit subject to satisfaction of other requirements as provided by S.10: without such essential terms being decided, contract cannot be enforced by law as it is deemed to be incomplete.”
“It is clear that in the absence of signed agreement between the parties, it would be possible to infer from various documents duly approved and signed by the parties in the form of exchange of e-mails, letter, telex, telegrams and other means of tele-communication.”
Therefore, in situations where there is no single physical agreement containing original signatures from both parties, and instead each party has a copy of the agreement—one with their own original signature and the other with the printed signature of the other party—the contract remains valid and enforceable. The lack of a single document with both original signatures does not invalidate the agreement. What is crucial is that both parties have clearly agreed to the terms and demonstrated their intent to be bound by them. Thus, for a contract to be considered valid and enforceable under contract law, it must include elements like offer, acceptance, consideration, the intention to create legal relations, the authority and capacity of the parties, and certainty. If any of these elements are missing, the contract may not be legally binding and could be unenforceable in court.
This reflects the author’s views based on the cases and interpretations of the law; it should not be considered legal advice.
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